By Research Team on “Invigorating Vitality of Innovation Entities”, Enterprise Research Institute, DRC
Equity-based crowdfunding is an Internet-based financing means through open market operations, from which a new form of business has emerged. At the present stage, in order to guide this business into a standardized development track as soon as possible, the government needs to adopt preferential policy measures to bolster its performance.
First, the equity-based crowdfunding model is plagued with some legal issues and one of which is related to corporate governance. On one hand, under the current policy framework, the equity-based crowdfunding model is often viewed as “illegal fund-raising.” On the other hand, problems related to corporate governance easily loom up including internal controls, intangible controls, the absence of governing bodies or governing bodies having difficulties in performing relevant duties.
Second, the government needs to issue in good time more authoritative laws and regulations with long-term effects, give a clear-defined legal status to equity-based crowdfunding, and regulate equity-based investment and financing for crowdfunding according to revised laws and regulations so as to resolve the newly emerged issues and provide adequate room for the development of equity-based crowdfunding. In addition, the government needs to flesh out the administrative rules and regulations to make standardized development become a common consensus and code of conduct in the equity-based crowdfunding market.
Third, with the support of information technology, the government needs to guide enterprises to establish a relatively normalized corporate governance mechanism based on adaptability and self-discipline and in line with the principles of balanced performance in terms of cost, risk and interest. Enterprises need to streamline the organizational setup and facilitate the mechanism construction with information disclosure at the core while sticking to the principle of making it easy for investors’ supervision without adding too much cost. Besides, with proper government guidance, the equity-based crowdfunding enterprises need to pay more attention to optimizing ownership structure and making it become more compatible with business performance.